Oregonian file photoThis Sherwood home, with a market value of $809,616 was one of the higher priced properties in the state's senior tax deferral program last year.
Randy L. Rasmussen/The Oregonian

Elderly and disabled homeowners who have been kicked off the state's property tax deferral program had one message for government officials Monday: Do something. Fast.

A crowded town hall meeting at the Hollywood Senior Center marked the first time Portland area legislators and Multnomah County officials came face-to-face with the real-life consequences of new rules set by the 2011 Legislature for a decades-old tax deferral program intended to help poor elderly remain in their homes.

Thousands who were eligible last year have been dropped either because they no longer qualify or didn't know they needed to reapply.

From her seat in the front row, Linda Miller said she earns less than $10,000 a year and doesn't have the money to pay the taxes on the house she's owned for 16 years.

"This is going to kill me," she said. "If I have to pay taxes, I will lose this house."

Standing in the back of the crowd, Bob Hembree complained that the state didn't tell him he no longer qualified until a few weeks ago. Now he has to come up with $2,000 by Nov. 15.

Under the old rules, homeowners qualified for the program if they were disabled or at least 62 years old and could prove their annual taxable income was no more than $39,500. The idea was that the taxes would be paid back, with interest, after the homeowner sold the house, refinanced or died.

But late last year, the Revenue Department warned state officials there wasn't enough money flowing into the fund to pay $20 million owed to counties. A number of factors had created the shortfall, including a busted housing market and a 2008 legislative decision to take $14.2 million out of the fund to pay for other senior programs.

The 2011 Legislature borrowed $19 million to pay November's tax bills. Then lawmakers wrote more restrictive rules for a program they admitted they'd long ignored.

An investigation earlier this year by The Oregonian found nearly 200 homeowners with houses valued in excess of $500,000 had benefited from the program intended to help the poor.

The new rules included stricter asset limits and income criteria. Homeowners have to live in the house for at least five years. The interest terms were changed from 6 percent simple interest to 6 percent compound interest.

The biggest change for many was that properties with reverse mortgages, which allow seniors to convert some of their home equity to cash, would no longer qualify because legislators were concerned there wouldn't be enough equity left to repay the state fund.

Statewide, the Oregon Department of Revenue says about 5,000 homeowners have been approved for the tax deferral this year, down from more than 10,000.

About 1,700 homeowners who qualified for the program previously no longer qualify because they have reverse mortgages. About 300 others who submitted new applications were turned down for the same reason. So far, 90 homeowners have filed appeals with the state tax magistrate.

Multnomah County Chair Jeff Cogen described the Legislature's attempt to "get millionaires off the program" as the "right thing to do."

"No one really knew the extent of the problem that would be created, specifically with the reverse mortgage situation," he said. "When there's a dramatic problem we should be able to come up with solutions."

State Sen. Ginny Burdick, a Portland Democrat who chairs of the Senate Finance and Revenue Committee, promised Monday's crowd that the Legislature would return to the issue in its February session and work to "provide some kind of glide path" for those who were cut with little notice.

But Burdick also noted there is little chance that everyone would be reinstated.

"This is not an entitlement program," she said.

At the end of the two-hour session, one woman yelled out: "Do we have hope? Or are we dead in the water?"

Rep. Michael Dembrow, D-Portland, attempted an answer: "I can promise you we'll do what we can."

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